3 ms·

Wow, that's actually a pretty compelling case. A summary for those of you not quite grasping it is, mining means bitcoin has capital outflows, and to maintain

Wow, that's actually a pretty compelling case. A summary for those of you not quite grasping it is, mining means bitcoin has capital outflows, and to maintain a stable price needs equal capital inflows in the form of new demand. It's security is proportional to this inflow/outflow value, so if you lower the capital outflow you require less capital inflow but reduce it's security. A network with no capital outflow is a network with no mining happening at all, a network with high security means a network with either high capital inflows or a steady drop in price for each coin. The more spent on mining, the quicker the price will drop if new money doesn't enter the market. Compound this with the relationship between market cap and liquidity and it paints a very bad picture. Add the business about halvenings and it's worse. An asset that requires capital inflows cannot store value, an asset that has no security cannot store value, and those are your only options with bitcoin, so it isn't a store of value. I'd love if someone could refute it, I couldn't find a comment in this thread that did, the only refutation I can come up with is if bitcoin were actually used as money by everyone that would be the same as capital inflows equaling capital outflows and you'd have no change in value, although you'd have a change in value for an entire economy as you burn resources to secure it which would be price inflationary which amounts to the same thing.

eaurouge 4y ago
I'll try to simplify it. The network pays miners to secure the network. The network earns transaction fees. It also mints new money through inflation. In its bootstrap phase, while the network isn't earning enough in transaction fees, the network relies on inflation to supplement its earnings in transaction fees. It pays its miners with a combination of the two. This is not too different from a startup relying on stock options to incentivize employees, contractors, painters of art pieces etc, while still in its growth phase. The rest of the article conflates the market for BTC, buyers, sellers, holders etc, with the above. To be clear, I'm not making a declaration on what is or is not a store of value.
- imafish 4y ago
  As I understand the article, it argues that relying on transaction fees to reward miners is not viable, as there are too few transactions happening thus making the transaction fees extremely high. > "$7.125B / 91,250,000 tx = $78 per transaction." > "But we just proved the store-of-value narrative breaks down because of the $7.125B/year leak and the fact that mining is unsustainable long-term unless it is subsidized by transaction fees, which will not exist because transacting on Bitcoin is slow and expensive."
  - betwixthewires 4y ago
    That is not the point of the article. The point is that, as long as miners have to liquidate bitcoin to pay for power, capital will continue to flow out of bitcoin. As a result, either the price will go down or it requires capital inflow, both scenarios mean it is not a store of value. Additionally it talks about the implications on the security of the network as a result of this dynamic.
- betwixthewires 4y ago
  I understand how bitcoin works. I'm a big fan of bitcoin actually. But what you've said doesn't refute the article or what I've said. Every time a miner sells their reward, whether it be a coinbase transaction or fees, it puts sell pressure and drives the price down. For bitcoin to even stay at a stable price requires corresponding buy pressure, new capital. An asset that continuously requires new money to enter it's market to maintain its value is not a store of value.

eaurouge 4y ago

I'll try to simplify it. The network pays miners to secure the network. The network earns transaction fees. It also mints new money through inflation. In its bootstrap phase, while the network isn't earning enough in transaction fees, the network relies on inflation to supplement its earnings in transaction fees. It pays its miners with a combination of the two. This is not too different from a startup relying on stock options to incentivize employees, contractors, painters of art pieces etc, while still in its growth phase. The rest of the article conflates the market for BTC, buyers, sellers, holders etc, with the above. To be clear, I'm not making a declaration on what is or is not a store of value.

imafish 4y ago
As I understand the article, it argues that relying on transaction fees to reward miners is not viable, as there are too few transactions happening thus making the transaction fees extremely high. > "$7.125B / 91,250,000 tx = $78 per transaction." > "But we just proved the store-of-value narrative breaks down because of the $7.125B/year leak and the fact that mining is unsustainable long-term unless it is subsidized by transaction fees, which will not exist because transacting on Bitcoin is slow and expensive."
- betwixthewires 4y ago
  That is not the point of the article. The point is that, as long as miners have to liquidate bitcoin to pay for power, capital will continue to flow out of bitcoin. As a result, either the price will go down or it requires capital inflow, both scenarios mean it is not a store of value. Additionally it talks about the implications on the security of the network as a result of this dynamic.
betwixthewires 4y ago
I understand how bitcoin works. I'm a big fan of bitcoin actually. But what you've said doesn't refute the article or what I've said. Every time a miner sells their reward, whether it be a coinbase transaction or fees, it puts sell pressure and drives the price down. For bitcoin to even stay at a stable price requires corresponding buy pressure, new capital. An asset that continuously requires new money to enter it's market to maintain its value is not a store of value.